GrainCorp Rejects Higher A$2.8 Billion ADM Offer as Too Low

“The increase in the proposed price has not changed the
board’s view that ADM’s proposal materially undervalues
GrainCorp,” the Sydney-based company said today in a statement.
“GrainCorp’s board will be constructive in any dealings in
relation to proposals that have the potential to be in the best
interests of shareholders.”

ADM raised its bid by 3.8 percent last week as it seeks
control of the only major publicly traded grain merchant in
Australia. A successful deal would give the world’s largest corn
processor control of seven of the eight ports that ship grain in
bulk from the east coast of Australia, the second-biggest wheat
exporter.

“It was very unlikely that GrainCorp would get won over by
such a small sweetener,” Peter Esho, Sydney-based chief market
analyst for City Index Ltd., said by phone. “While the momentum
is behind the business I think shareholders will be quite
pleased to let the board either seek out another interested
party or continue to talk up the business.”

GrainCorp dropped 0.7 percent to A$12.30 at the close of
trading in Sydney, 10 cents above ADM’s A$12.20 offer. The
latest bid is 40 percent higher than GrainCorp’s closing share
price on Oct. 18, the day before the initial approach was
announced, according to Decatur, Illinois-based ADM.

‘All Options’

The bid offers “more certainty, greater value and
immediate realization of potential future value for GrainCorp
shareholders than GrainCorp’s stand-alone plan,” Jackie Anderson, an ADM spokeswoman, said in a statement. “We intend
to consider all our options with respect to GrainCorp.”

ADM raised its stake in GrainCorp to 19.9 percent with the
approval of the Australian Foreign Investment Review Board when
it increased the price from A$11.75 last week and said GrainCorp
shareholders would still be entitled to the 35 cents share
dividend announced last month.

“ADM showed its hand by only slightly bumping up their
offer,” said Esho. “The agribusiness space doesn’t always move
in in a straight line. There will come a point where GrainCorp
earnings growth disappoints the market. ADM might see that as an
opportunity to then re-initiate its takeover.”

ADM, which got 52 percent of its sales from the U.S. in its
last fiscal year, has been working to increase foreign revenue.
Net income dropped 60 percent in the quarter through September
from a year earlier on losses in ethanol and after the worst
U.S. drought in five decades reduced grain merchandising and
handling volume.

Biggest Deal

Credit Suisse Group AG and Greenhill & Co. are advising
GrainCorp, and Barclays Plc and Citigroup Inc. are acting for
ADM.

Buying GrainCorp would be ADM’s biggest deal. The largest
so far is its $470 million purchase of W.R. Grace & Co.’s cocoa
business in 1996, according to data compiled by Bloomberg.

The revised proposal is still too low, with an offer of
between A$13.97 and A$14.33 a share “more in line with recent
transactions,” Belinda Moore, a Brisbane-based analyst with RBS
Morgans Ltd., said in an e-mailed note Dec. 4.

GrainCorp said Nov. 15 that ADM’s original proposal
undervalued it -- pointing to its global portfolio of grain-
processing assets that handle about 75 percent of annual
production on Australia’s east coast. Australia is the world’s
second-largest wheat exporter.

“GrainCorp has a unique portfolio of integrated, strategic
assets and is confident in its outlook and strategy to continue
to deliver shareholder value,” the company said today.